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What’s dragging HDFC Bank shares? Return on assets is just one of the worries.

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HDFC Bank, after the HDFC Ltd merger last July, has entered the elite list of top 10 global banks with the highest market cap.

Synopsis
HDFC Bank’s return on assets (RoA) has slipped below 2%, which is rare. RoA is expected to remain around 1.8%-1.9% for the coming financial years, reflecting a possible pressure on the net interest margin. While its valuation remains high compared to the pre-merger 10-year average price-to-book value of 3.4x, does the current stock price fall make it for a buy?

HDFC Bank shares plunged 8.4% on last Wednesday, January 17, its biggest single-day decline since the pandemic-induced crash in March 2020. The fall in the shares of India’s most-valued bank had a ripple effect across the market, dragging benchmark indices. FIIs (foreign institutional investors) went on a selling spree offloading over INR10,500 crore — the biggest single-day sell-off in at least five years. The majority of FII selling was

( Originally published on Jan 19, 2024 )